ACCOUNT TYPE
Simple IRA
A SIMPLE IRA is a self-directed employer plan in which the employee can make tax-deferred contributions and the employer can match a portion of those contributions.
AT-A-GLANCE
What should you know about a Self-Directed Simple IRA?
Tax Benefits
- SIMPLE IRA contributions are deducted from an employee’s income for tax purposes.
- Investment earnings are tax deferred as well.
- Distributions (withdrawals) are taxed as income, but ideally at retirement age when you are in a lower income tax bracket.
Other Benefits
- Employers can make matching contributions of up to 3% of an employee’s income.
- Employers can also elect to contribute 2% of an employee’s income to all eligible employees, regardless of their employee contribution activities.
DISTRIBUTION RULES
What should you know about Simple IRA distributions?
Minimum Distribution Facts
- With a SIMPLE IRA, you must begin taking the required minimum distributions at age 72.
- The required minimum will vary each year based on your age and your account balance as of December 31, the prior year.
Early Distribution Facts
- SIMPLE IRA distributions are considered “early” if taken prior to age 59 ½.
- In addition to income taxes, early distributions are subject to 10% penalties.
| BELOW AGE 59½ | AGE 59½ - 72 | AGE 72 OR OLDER | |||
|---|---|---|---|---|---|
| You may distribute cash or assets from your Traditional IRA at any time, though a 10% early distribution penalty will apply. This penalty will be assessed on top of any applicable taxes. | Upon reaching age 59½, you will no longer have to worry about the 10% early distribution penalty. Withdrawals will be taxed as regular income and need only occur at your election. | You must begin taking required minimum distributions (RMDs) every year. RMDs are calculated in accordance with your age and your account value. |
BELOW AGE 59½You may distribute cash or assets from your Traditional IRA at any time, though a 10% early distribution penalty will apply. This penalty will be assessed on top of any applicable taxes. |
|
AGE 59½ - 72Upon reaching age 59½, you will no longer have to worry about the 10% early distribution penalty. Withdrawals will be taxed as regular income and need only occur at your election. |
|
AGE 72 OR OLDERYou must begin taking required minimum distributions (RMDs) every year. RMDs are calculated in accordance with your age and your account value. |
Contributions
Employees can enjoy employer contributions while making contributions of their own. Employees can contribute 100% of their compensation up to $13,500 in 2020 and 2021. SIMPLE IRA holders 50 years old or older may contribute an additional $3,000 per year.
Employers can either match employee contributions up to 3% of compensation or contribute 2% of an employee’s compensation to all eligible employees, regardless of their compensation activities.
Transfers
In the case of a SIMPLE IRA, the account must be open for two years before it can be transferred. The following account types can be transferred to or from a SIMPLE IRA: SIMPLE IRA, Traditional IRA, SEP IRA
Rollovers
In the case of a SIMPLE IRA, the account must be open for two years before it can be rolled over. The following account types can be rolled to or from a SIMPLE IRA: 401(k), 403(b), 457(b), Thrift Savings Plan
OTHER INVESTMENTS
ROI is everywhere if you know where to look.
No financial advisor knows you better than yourself. With a Self-Directed IRA you have the freedom to invest your tax-advantaged retirement funds in the assets you’re most passionate about. From real estate to startups to small businesses to more “out there” opportunities, if you can find it, we will help you fund it.
EDUCATION CENTER
Want to learn more about Simple IRA accounts?
Self-Directed IRA Guide
